VW prioritizes US battery plant over Europe as it demands €10 billion from Biden government

Volkswagen is putting a planned battery plant in Eastern Europe on hold and prioritizing a similar plant in North America after it estimates it could receive €10 billion in US funding.

The decision is the latest in Joe Biden’s $369 billion package of green tech subsidies and tax incentives, which is luring European companies to the US.

Europe’s biggest automaker told EU officials last week that it expects to provide between €9 billion and €10 billion in subsidies and loans.

VW was “waiting and waiting” to see how the EU would respond to Washington’s stimulus before moving ahead with a plan to build a plant in Eastern Europe, said a person with direct knowledge of VW’s decision-making process.

“Plans in North America have moved faster than expected, overtaking decision-making in Europe,” the person said.

The IRA has sparked panic among European politicians as high-tech industries like batteries, which it has nurtured for years, are looking across the Atlantic in the face of increasing competition from China.

The European Commission, which is due to publish a net-zero industry law next week in response to the US environmental program, wants to relax state aid rules and is re-examining whether to use subsidies at the EU level. But an early draft outlined last week fell short, according to industry executives.

A senior executive at another European battery maker, who was present at the meeting in Brussels attended by Competition Commissioner Margrethe Vestager last week, said: “It’s looking pretty bad. Concrete measures were missing.”

Another executive said: “We have been contacted by many US states and all are highlighting the IRA. If we sum up the numbers, the conditions they offer are much more interesting than the conditions they offer in Europe.”

VW said no decisions had been made about where its plants would be located in North America or Europe and that it was committed to its plan to build more cell factories in Europe. “But for that we need the right framework conditions. That’s why we’re waiting to see what the so-called EU Green Deal will bring,” the company said.

Battery maker Northvolt, which also attended the meeting, suggested the US would be preferable to Germany when deciding on the location of its next gigafactory, unless Brussels gives more specific support, according to people aware of the discussions. Northvolt estimated it would be able to secure more than 8 billion euros in US subsidies for a factory, they said.

Northvolt declined to comment.

VW is making “much faster progress” with plans for battery factories in North America compared to Europe, wrote Thomas Schmall, head of the VW component unit, on LinkedIn after attending the meeting in Brussels. Europe is at risk of “losing billions in investments that will be decided in the coming months and years,” he added, calling for a European government bailout program and lower green energy prices.

Lobby group Transport & Environment warned this week that more than two-thirds of Europe’s battery projects are at risk of being cancelled, delayed or cut short.

VW, which has gone beyond most other automakers to secure increasingly volatile supply chains by announcing plans to not only assemble batteries but also manufacture cells, said two years ago it would build six gigafactories.

Arno Antlitz, VW’s chief financial officer, said last week the carmaker “would have done it [a North American battery plant] anyway”, but that the new subsidies accelerated his plans.

“The IRA gives us a tailwind in terms of speed and consistency, giving us the opportunity with the IRA to expand our global footprint in the US even faster.”